According to a research report by broker Bernstein, the recent U.S. district court ruling regarding Ripple’s XRP token is being hailed as a landmark judgment for the cryptocurrency industry. The court ruled that XRP should not be considered a security if sold via an exchange or through programmatic sales.
However, it did find that institutional sales of XRP violated securities laws. Despite this finding, the ruling is seen as a major development that removes uncertainty for XRP and its holders, who acquired the token through exchanges.
The US Court’s Decision Will Have a Major Impact on Crypto Regulation
The court’s decision is seen as reducing the impact of securities regulations on tokens sold on exchanges and providing significant relief for tokens traded on secondary platforms. Analysts at Bernstein, led by Gautam Chhugani, highlight that this verdict underscores the need for a distinct regulatory framework for digital assets.
They argue that the “Howey test,” which determines whether an investment qualifies as a security, cannot be applied directly to tokens on exchange platforms. Instead, the context of the transaction must be considered.
Bernstein’s analysts note that this ruling weakens the U.S. Securities and Exchange Commission’s (SEC) stance that digital assets are covered by existing securities laws and do not require separate clarity. They believe that the court’s interpretation and the resulting contextual analysis needed for each case demonstrate the necessity for specific guidelines regarding digital assets.
The brokerage firm regards this ruling as a significant milestone that alleviates the regulatory uncertainty surrounding the crypto industry. They anticipate that institutional investors, who have been hesitant to engage with digital assets due to regulatory challenges, may now reconsider their stance.
